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Hanger 42 – Celluoid Burns Like Napalm

Perhaps no one has yet noticed the similarity between the name and the amount (percentage) of credit provided to film makers for their “investments” into the Michigan Economy? Could it be possible, the sheer audacity of what now appears to be a scam to separate Michigan taxpayers from their hard earned dollars would lend itself to the very name of the tool used to perpetrate such fraud?

It seems there is not a shortage of bold, in-your-face claims with regard to this project, or the very nature of its ability to feed corruption. The naming convention, given recent news should come as no surprise.

The Mackinac Center Legal Foundation Director Patrick Wright today called for an official inquiry by the Michigan Legislature, Michigan Attorney General and the U.S. Attorney’s Office into the Hangar42 state film subsidy deal in wake of troubling revelations and state silence surrounding the project.

Concerns about the purchase price of the studio, the nature of the arrangement between the seller and buyers and the level of the potential state subsidy were compounded yesterday when The Grand Rapids Press reported on a state representative’s aide bragging publicly about his ability to profit from state subsidies on an unnamed film incentive deal. Wright carefully states:

“While there is no clear indication that a crime has been committed, there are enough questions surrounding this deal that the Legislature, the Michigan Attorney General and the U.S. Attorney’s Office should carefully scrutinize it and take appropriate action”

The Mackinac Center was the first to publicly raise questions about the Hangar 42 deal with an essay and investigative video posted on its website May 20. Fiscal Policy Director Michael LaFaive and Communications Specialist Kathy Hoekstra reported that the building converted into a studio was on the market for $9.8 million as late as February, but apparently sold for as much as $40 million shortly thereafter. The result was a significantly larger potential state subsidy.

Some speculate that a down payment was made to the owner who could care less if the $40 million loan were to go into default. But with the purchase at that price, the state pays the credit, hanger 42 never pays, and seller of property and buyer of property walk away with more than they started. The “braggadocio” aide to Representative Robert Dean, seems to have let the proverbial cat out of the bag.

And now taxpayers should be looking for answers. But that may not be so easy according to LaFaive:

“The state of Michigan, which normally makes a public spectacle out of these projects, has thrown up a Berlin Wall between information and taxpayers in this case. The governor crowed about Hangar42 in her State of the State address, so why are the involved agencies now claiming that the details of this multimillion-dollar project are a closely held secret?

“Taxpayers deserve to know how the financing of this project was structured. If the Michigan Film Office, the Michigan Economic Development Corp., the seller and the buyers are all unwilling to answer questions, the Legislature should start asking them.”

LaFaive pointed to a series of unusual actions related to Hangar42. One of the buyers (some of whom have not been identified) told The Grand Rapids Press that the property was purchased on a land contract. LaFaive and Hoekstra were told by contractors hired to improve the studio that they have not been paid by the seller. The buyer told The Press that contractors would be paid once the state infrastructure credit was received.

LaFaive asks:

“Why would the studio buyers pay the seller’s contractors? And why would it be contingent on securing the state subsidy? Do legislators and the Governor want a film subsidy program that costs so much public money while avoiding serious public scrutiny? If not, they have to say so; if so, they should explain why.”

Indeed..

Apparently, Janet Lockwood, director of the Michigan Film Office, also has qualms about the project. In an e-mail obtained by the Mackinac Center, Lockwood wrote to colleagues,

“I feel completely responsible after encouraging the Gov. to mention this project. They’ve received not a penny but perception is all. If it will help, I’m happy to claim fault and deflect it from the front office. So disappointing, it looked so promising. But it’s not. This time I am agreeing with the Mac Center.”

The MFO, the MEDC, the Department of Treasury and the Office of the Governor, however, all refuse to say whether the subsidy will be awarded.

If it is, it should signal the end of the film credit program, and will in all probability buttress the claims of MEDC foes, that taxpayer financed, private windfalls are the play-field of the corrupt.

In 2003, as Michigan was accelerating into what would later be dubbed an economic “lost decade” and tax collections were in decline, legislators were desperate to avoid hard decisions on necessary spending cuts. http://www.michigancapitolconfidential.com/24364

Michigan State University pays its top media spokesman $195,765 a year. Now in "crisis mode," MSU has hired another media relations expert at $325 an hour. http://www.michigancapitolconfidential.com/24370